31 December 2013

The 2013 SRBP Themes (Part 2) #nlpoli

Federal provincial relations

Cast your mind back to the early part of 2012.  Kathy Dunderdale was frustrated.  She couldn’t figure out how to deal with the crowd in Ottawa. 

Suck up to them. 

Attack them. 

Didn’t matter.

They still wouldn’t do what Kathy wanted.

Kathy might still be frustrated.  We don’t know.  Right now in all her year-end interviews she is talking about how 2013 was a challenging year for her personally. When she gets around to it, Kathy might go back to be frustrated, but the rest of us can help her out based on what we saw of Kathy and her friends last year and how they dealt with the federal government.

A big part of the problem is the way Kathy and the Conservatives have turned federal-provincial relations from a story about provincial interests to a personal, hyper-partisan feud.  The fruits of a very poisonous tree (May 2013) have made things very sick.  It’s not surprising Kathy and her friends have trouble.

Another big part of the problem is that the provincial politicians may be running a “have” province on paper, but their heads are still stuck in the past.  Like governments in so many states around the world that are dependent on outside sources of cash for their revenues, the provincial government in Newfoundland and Labrador doesn’t know how to mange its own affairs.  It only knows how to reduce everything to a demand for Other People’s Money (March 2013).

A couple of months after SRBP ran that series on rentierism and the resource curse in Newfoundland and Labrador, and a couple of weeks after the post on the poisonous tree, the provincial government was apparently in a racket with Ottawa over trade with Europe. 

We didn’t get a clearer picture of what happened until December when Kathy Dunderdale released a small collection of documents about the earlier trade dispute.  Not surprisingly, the whole thing was about Converting principles to other people’s money (December 2013). 

The provincial government offered to give up a bankrupt policy that actually was doing the province no good but only in exchange for what trade minister Kevin Hutchings described as “compensation”.  By compensation, he meant a huge pile of federal cash on a raft of topics.

In the end, the provincial government gave up the policy, at least for the Europeans. They didn’t get the cash they wanted, though.  Instead, they wound up cost-sharing a small fisheries subsidy fund with Ottawa.

And despite the evidence in the letters,  Hutchings now claims that the provincial government agreed to change the minimum processing policy in order to do away with the European tariff protections.  According to the correspondence, that was the argument everyone else urged on Hutchings.  He and his colleagues actually talked about the need for appropriate “compensation” for giving up what was supposedly their only policy instrument to increase local processing.

Energy policy

In 2009,  then-Premier Danny Williams bragged that he and his colleagues planned to use money from non-renewable oil resources to build a hydro-electric generating plant on the Lower Churchill River that would produce loads of green energy and loads of green cash.

That’s when:

  1. they still had dreams of finding markets in the United States for all that electricity, and,
  2. they even had enough cash in the bank from windfall oil royalties to pay for most of the project without having to borrow very much – if anything – to get it done.

Skip ahead to 2013.  In December, the provincial government celebrated a deal with the federal government that allowed the provincial energy corporation to borrow $5.0 billion to build a small dam at Muskrat Falls. On top of that, the provincial government will borrow whatever else they need as “equity” in what is now a $7.2 billion project ($8.7 billion including the Maritime Link).

Nalcor will get the assets.  Nova Scotians and others will benefit from cheap electricity  (Pride goeth, more undisclosed risk… July 2013)Taxpayers will get the entire bill.  So it was in the Abitibi expropriation, so shall it be for Muskrat Falls, a point SRBP made in Tom Marshall’s dead Muskrat sketch (May 2013)

In a sense, the December announcement was a triumph of old-fashioned approach to federal-provincial relations.  The loan guarantee was a form of federal (i.e. other people’s) money and the December announcement was an old-fashioned celebration of “victory” by local politicians bringing home the spoils.

In another sense, the new financing for the project demonstrated how the old ideas, the original plans were now dead.  The ever changing energy plan (June 2013) went that way in June.  Rather than replacing oil with hydro,  Kathy Dunderdale talked in June of the need for more oil development offshore.  She didn’t explain how the provincial government would deal with the Law of the Sea’s Article 82 Question (June 2013).

The equity stakes that formed a key part of the 2007 energy also disappeared before the end of the year, con firming that the provincial government had abandoned the energy plan almost completely (October 2013).

The Stuff they Don’t Say

What Nalcor and the provincial government didn’t abandon in the rush to build Muskrat falls was their love of secrecy.  For all their efforts, Nalcor couldn’t obscure The price of a dam (July 2013).  it was easy to figure out the relative costs (July 2013) of Muskrat Falls compared to other projects on a cost per megawatt basis. Still, the stuff Nalcor  didn’t say stood out like Voids and spatter (July 2013).  We might not be able to quantify some of it yet, but we could see something big and important was missing from the Nalcor accounts.

Then again, so much of Muskrat Falls isn’t about what it seems.  You can see that especially in Nalcor’s complaints to the Regie (August 2013), a subject that still hasn’t been accurately reported in Newfoundland and Labrador.

Nor has anybody explained how it is that in the October supplementary agreement (October 2013) with Emera, Nalcor expects to produce an additional 1.2 TWh per year on the island of Newfoundland beyond what it current has available.  That’s what they plan to sell to Nova Scotia but until now, Nalcor needed Muskrat Falls to meet the island’s electricity demand because it didn’t have enough electricity. 

As it turned out, by the end of the year, we’d learned that  The Hollowmen of Newfoundland and Labrador (December 2013)  planned to sell cheap electricity from Bay d’Espoir to Nova Scotia while forcing expensive electricity on its island customers in a captive market.

Shifting policy. 

Changes in direction.

Both form a set-up to the start of the third instalment in this year-end series, coming on Thursday.